North Carolina Pension Fund Rises 4.1% in 1Q

Public equity outperforms, while fixed income lags behind.

North Carolina reported a 4.1% gain for the first quarter of 2017 for the state’s pension fund, bringing its total assets to $92.2 billion, from $89.1 billion at the end of 2016.

“Our public equity portfolio did especially well during the first quarter of this year,” said North Carolina State Treasurer Dale Folwell. “But fixed-income continues to lag due to historically low interest rates.”

The state’s pension fund is up 9.6% from the same time last year, and has returned 4.9%, 6.8%, and 5.3% over the last three, five, and 10 years, respectively.

Public equity, which makes up more than 40% percent of the total fund’s asset allocation, rose 7% for the first quarter, and is up 14.9% over the past year, while private equity gained 2.3% for the quarter, and 6.6% over the past year. Non-core real estate assets grew 3.6% for the quarter, and 12.1% since the first quarter of 2016, while core real estate investments rose 3.2% during the first quarter of 2017, and 8% over the past year.

Opportunistic fixed income returned 2.7% for the quarter, and 12.9% for the year, while investment grade fixed-income investments gained 1% during the quarter, and 0.9% over the past 12 months. Inflation-sensitive and diversifier investments increased 3.3% for the quarter, and have risen 10.9% since the year-ago period.

All of the performance figures are reported net of all fees and expenses.

Folwell also said he has cut $25 million in fees so far, which is a quarter of the way through his pledge to cut $100 million before the end of his first term.

“The fees cut so far are the floor, not the ceiling,” said Folwell.

Folwell also said he would work toward reducing the pension plans’ expected rate of return. Last month, North Carolina’s Teachers’ and State Employees’ Retirement System (TSERS) and Local Government Employees’ Retirement System (LGERS) voted to lower the investment return assumption for the fund from 7.25% to 7.20% beginning with the December 31, 2016, valuations.

“We are focused on reducing complexity and fees in the state pension plans,” said Folwell. “We also want to gradually lower the expected rate of return to more accurately reflect historical gains.”


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